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'A Universal Pension for Ireland' 2013
Ireland could and should have a Universal Pension for everyone over 65. it could be paid for principally by standard rating the current tax-break for private pensions. More than 80% of benefit of the current tax break goes to the 20% with highest earnings. A Universal Pension would be simpler, fairer and more just as well as being sustainable in the decades ahead.
No existing pensioner would lose out and many would experience an increase in the Universal Pension. In particular, those adults aged 66 years and older, in respect of whom reduced payments are now made due to their status as ‘Qualified Adults’, would receive a Universal Pension in their own right.
- Ireland could finance a universal pension for every person over 65 (subject only to a residency qualification) by simply reducing the current tax break for private pensions according to a new study commissioned by Social Justice Ireland published today.
- Pension would be set at €230.30 a week (current contributory pension rate) until 2016 and then rise over time to 40% of average earnings.
- The universal pension would replace the current contributory and non-contributory state pension.
- Study shows that this approach is sustainable in the long term.
- During the late 1990s and up to the present day, pension policy has provided large tax subsidies to those who needed them least, at significant cost to the Exchequer, while failing to guarantee adequate post-retirement incomes to the majority of the population.
Introducing a Universal Pension along the lines proposed by Social Justice Ireland would:
- provide older citizens, regardless of their previous social insurance contribution record or means, with a guaranteed income during old age;
- provide those older people who do not receive any support through the state pension system with a pension thus achieving universal coverage;
- provide a secure and certain framework around which citizens can plan for their retirement;
- distribute income from the wealthiest in society to the poorest, creating a more egalitarian society and
- ensure the long-term sustainability of the state pension system.
“Introducing a Universal Pension along the lines proposed by Social Justice Ireland would be a strongly progressive change, as nearly 82% of the current tax relief for private pensions accrues to the top 20% of earners, with 56% accruing to the top 10% of earners. Implementation of a Universal Pension along the lines proposed bySocial Justice Ireland would provide security, equity and certainty. It would also be just, efficient and sustainable.
This study is part of a wider project Social Justice Ireland has been developing in which the desirability, viability and technical challenges of ensuring every person in society has a guaranteed basic income is analysed in detail.
The study was conducted by Adam Larragy (University of London). Concluding his presentation at the launch of the study, he said: “The authors of the 1919 Democratic Programme believed that people in old age were ‘entitled to the Nation’s gratitude and consideration’. The universal pension envisioned in this document is a practical expression of this idea. It would be an assertion of solidarity between the generations, and between those with have more, and those who have less. It would be a recognition that we all contribute to this country, and that we are all entitled to a just share in our old age.”
Key Characteristics of the Universal Pension proposal
- The universal pension would replace the State Pension (Contributory), State Pension (Non-contributory), the Death Benefit and the Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension for all those above the state pension age. It would also be paid to those who are currently only receiving an income through their spouse or partner’s state pension as Qualified Adults aged 66 and over.
- The rate at which the universal pension is paid would be the current rate of the State Pension (Contributory), which is €230.30 a week. This would immediately raise the payments to those on the State Pension (Non-contributory), two-thirds of whom are women, by a minimum of €10 a week. It would also provide a pension in their own right to those receiving the Qualified Adult increase for those aged 66 and over.
- The Universal Pension would be residency-based. Each full year an eligible individual is resident in Ireland between the ages of 16 and the state pension age they would accumulate a 1/40th or 2.5% increase in the Universal Pension. For example, if the state pension age was 66 and an individual had been legally resident for 30 years between the ages of 16 and 66 they would receive 75% of the full rate of the Universal Pension.
- On the introduction of the Universal Pension, all pensioners who had been in receipt of a full state pension – contributory or non-contributory – would be allocated a full Universal Pension at the full contributory rate.
- Those pensioners who had then been in receipt of no state pension or reduced pension amounts - as Qualified Adults or on the basis of a means test or on the basis of their PRSI contribution history – would initially receive their current amounts. However, they would be entitled to apply to have their payment increased based on the length of residency in Ireland.
- If they have been resident in Ireland for 40 years, from age 16 to pensionable age, they would receive the full Universal Pension.
- If they have less than 40 years residency, they would receive as their Universal Pension the more favourable of the following:
o A residency-related pension (2.5% of the full Universal Pension per year of residence)
o Their current pension amount.
- This means that no existing pensioner would lose out and many would experience an increase in the Universal Pension. In particular, those adults aged 66 years and older, in respect of whom reduced payments are now made due to their status as ‘Qualified Adults’, would receive a Universal Pension in their own right.
- Qualified increases for children and adults under the age of 66 would continue to be paid on the basis that they are currently paid and the rate that they are paid would be a certain percentage of the Universal Pension rate. The increase for those aged over 80, those living alone and those living on designated islands would be maintained and the rate that they are paid would be a certain percentage of the Universal Pension rate.
- The Universal Pension would remain frozen until 2016, and thereafter would gradually rise to 40% of average earnings by 2025. It would remain linked at 40% of average earnings thereafter.